AI Takeaway
EL (Estée Lauder) posted Q3 FY2026 revenue of $3.71B (+4.6% YoY) but net income fell 44% to $89M as higher operating costs and elevated SG&A compressed margins significantly.
Revenue
$3.71B
++4.56% YoY
EPS (Basic)
$0.25
-43.18% YoY
Gross Margin
76.4%
++1.44% YoY
Operating Income
$249M
-18.63% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
Net sales rose to $3.71B in Q3 FY2026 from $3.55B a year ago, a 4.6% YoY increase, suggesting some demand recovery across the company's prestige beauty portfolio despite a challenging macro environment.
Source: Source: 10-Q Income Statement
Gross margin improved 140 basis points YoY to 76.4%, aided by a 1.5% decline in cost of revenue to $876M. However, operating income dropped 18.6% to $249M as SG&A remained elevated at $2.28B, consuming the gross profit gains.
Source: Source: 10-Q Income Statement
Net income fell 44% YoY to $89M, with diluted EPS dropping from $0.44 to $0.24, reflecting higher below-the-line costs (interest, restructuring, or other charges) beyond the operating line that significantly eroded profitability.
Source: Source: 10-Q Income Statement
2 more insights available
Upgrade to unlockNet income declined 44% YoY to $89M even as revenue grew 4.6%, indicating that cost structures — particularly SG&A at $2.28B — are growing faster than the company can convert top-line gains into bottom-line results. This margin compression risk could persist if restructuring or investment spending remains elevated.
Source: Source: 10-Q Income Statement
Unlock 4 more detailed risk analysis
Upgrade to unlockReported EPS of $0.91 versus the $0.67 analyst consensus — a +36.2% beat for Q3 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $3.71B | $3.55B | +4.56% |
Cost of Revenue | $876M | $889M | -1.46% |
Gross Profit | $2.84B | $2.66B | +6.58% |
Operating Income | $249M | $306M | -18.63% |
Net Income | $89M | $159M | -44.03% |
EPS (Basic) | $0.25 | $0.44 | -43.18% |
EPS (Diluted) | $0.24 | $0.44 | -45.45% |
SG&A Expense | $2.28B | $2.26B | +0.93% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $19.66B | $19.89B | -1.12% |
Current Assets | $7.5B | $7.02B | +6.83% |
Current Liabilities | $5.91B | $4.96B | +19.08% |
Stockholders' Equity | $3.99B | $4.34B | -8.10% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash FlowYTD | $1.2B | $671M | +78.39% |
Investing Cash FlowYTD | $-304M | $-408M | +25.49% |
Financing Cash FlowYTD | $-682M | $-1.02B | +32.87% |
Share BuybacksYTD | $70M | $35M | +100.00% |
D&A | $201M | $204M | -1.47% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 76.4% | 75.0% | +1.44% |
Operating Margin | 6.7% | 8.6% | -1.91% |
Net Margin | 2.4% | — | — |
ROE | 2.2% | — | — |
ROA | 0.5% | — | — |
Current Ratio | $1.268 | — | — |
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EL reported Q3 FY2026 revenue of $3.71B (+4.6% YoY) with gross margin expanding to 76.4%, but net income fell sharply by 44% to $89M due to elevated SG&A costs of $2.28B. Diluted EPS dropped from $0.44 to $0.24, disappointing investors despite the top-line improvement.
Despite revenue growing 4.6% and gross profit rising 6.6% to $2.84B, net income fell 44% YoY to $89M because SG&A expenses remained high at $2.28B and additional below-the-line costs (such as interest or restructuring charges) further eroded profitability. The wide gap between gross margin (76.4%) and net margin (2.4%) illustrates how much of EL's revenue is consumed by operating and non-operating costs.
EL's year-to-date operating cash flow improved dramatically, rising 78.4% YoY to $1.20B, suggesting strong working capital management even as reported earnings declined. This divergence between cash flow and net income may reflect non-cash charges or timing differences in working capital.
Key risks include the 44% drop in net income despite revenue growth, tightening liquidity as current liabilities surged 19.1% YoY to $5.91B (pushing the current ratio down to 1.27), and declining stockholders' equity of $3.99B (-8.1% YoY). The persistently high SG&A cost base relative to operating income also poses a risk if revenue growth slows.
Yes, EL's revenue grew 4.6% YoY to $3.71B in Q3 FY2026, up from $3.55B in the same quarter last year. However, this top-line growth did not translate into bottom-line improvement, as net income fell 44% to $89M due to cost pressures.